Happy Holidays from Alisa Na CPAs and Advisors!

As 2026 approaches, we would like to share several timely reminders for our individual and business clients. The Internal Revenue Service is encouraging taxpayers to take proactive steps now to prepare for filing 2025 federal income tax returns next year. With year-end approaching, there are practical actions you can take to streamline the filing process and avoid last-minute surprises as the 2026 tax season begins.

The One Big Beautiful Bill Act (OBBBA) introduces multiple changes and new provisions that may affect federal taxes, credits, and deductions. Key updates include modifications related to tips, overtime pay, car loan interest, senior taxpayers, and the permanent extension of several provisions that were previously scheduled to expire on December 31, 2025.

Gather and Organize 2025 Tax Documents
To make tax time easier, establish an adequate record-keeping system, either electronic or paper, to organize all essential documents in one place. This includes year-end income forms such as:

• Forms W-2 from employers
• Forms 1099 from banks or other payers
• Forms 1099-K from third-party payment networks
• Forms 1099-NEC for non-employee compensation
• Forms 1099-MISC for miscellaneous income
• Forms 1099-INT for interest income
• Records of all digital asset transactions

Having complete documentation helps ensure an accurate return and can reduce processing delays or refund issues.

IRS Online Account
Individuals can create or access IRS Online Accounts for both individual and business purposes.
IRS Online Account for Individuals
IRS Business Tax Account

With an IRS Online Account, you can:

• View, make, and cancel payments
• Set up or change payment plans and check your balance
• View key details from your most recent tax return, such as adjusted gross income
• Request an Identity Protection PIN
• Obtain account transcripts, including wage and income records
• Sign tax forms such as powers of attorney or tax information authorization

Deadline for Final 2025 Estimated Tax Payment – January 15, 2026
Taxpayers who receive non-wage income—such as self-employment earnings, annuity payments, unemployment compensation, or income from digital assets—may need to make estimated or additional tax payments.

Wage earners can use the IRS Tax Withholding Estimator on IRS.gov to determine whether additional withholding is needed and help avoid an unexpected balance due when filing.

If you make estimated tax payments and qualify for any new deductions, you may want to review whether your final estimated payment should be adjusted. Similarly, wage earners should consider whether their current withholding remains appropriate.

Digital Assets and Taxes in 2025 – Form 1099-DA

The IRS has finalized new cryptocurrency reporting rules beginning with the 2025 tax year. If you buy, sell, or trade crypto through a custodial digital asset broker (such as Coinbase, Kraken, Binance, or a custodial wallet provider), these platforms will be required to report certain taxable transactions to the IRS using Form 1099-DA.
Form 1099-DA will include your information, the digital asset and amount sold, the sale date, and gross proceeds. The first 2025 forms are expected to be issued by March 31, 2026.
Please note: for the 2025 tax year, Form 1099-DA will not include cost basis. You will still need to track and calculate your basis before your return can be filed. Beginning in 2026, brokers will also be required to report cost basis.
Information on how to report digital asset transactions, including calculating capital gain or loss, determining basis, and reporting the income on the correct form, can also be found on the digital assets landing page.

Refund Timing and How to Avoid Delays

Most IRS refunds are issued within 21 days; however, you should not rely on receiving your 2025 federal refund by a specific date. Some returns take longer if the IRS needs to review them for errors, missing information, or possible identity theft or fraud.
Under the PATH Act, the IRS cannot release refunds for returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until mid-February.

IRS Moves Toward All-Electronic Refunds
The IRS has announced it will largely stop issuing paper refund checks, with limited exceptions. Taxpayers will be required to receive refunds electronically.
Filing electronically and selecting direct deposit remains the fastest and safest way to receive your refund. Please provide your tax preparer with updated bank account information to avoid delays.

One Big Beautiful Bill Act (OBBBA):
Key Federal Tax Changes Affecting Individuals

Senior Tax Deduction
For tax years 2025 through 2028, taxpayers age 65 or older may qualify for an additional $6,000 deduction per person, or $12,000 if both spouses qualify. The deduction phases out for income over $75,000 (single) or $150,000 (married filing jointly).

No Tax on Tips
Qualified cash tips received in eligible occupations may be deductible up to $25,000 annually. The deduction phases out for income over $150,000 (single) or $300,000 (married filing jointly).

No Tax on Overtime
Qualified overtime compensation may be deductible up to $12,500 ($25,000 for married filing jointly), subject to the same income phase-out thresholds as tips. This applies to overtime required under the Fair Labor Standards Act that exceeds your regular rate of pay.

Trump Accounts (New Child Savings Accounts)
A new savings account for children, similar to a traditional IRA. Parents may begin contributing on July 4, 2026. For children born between January 1, 2025, and December 31, 2028, the government may provide a one-time $1,000 deposit, provided both the child and parent have valid Social Security numbers.

Car Loan Interest Deduction
Through 2028, you may deduct up to $10,000 of interest on loans for qualifying passenger vehicles purchased after December 31, 2024. The deduction phases out for income over $100,000 (single) or $200,000 (married filing jointly). The vehicle must be new, manufactured primarily for public road use, and final assembly must occur in the United States.

State and Local Tax (SALT) Deduction
The SALT deduction cap increases to $40,000 for 2025 and $40,400 for 2026, with 1% annual increases through 2029, then reverting to $10,000 in 2030. The enhanced deduction phases out for taxpayers with income over $500,000 ($250,000 for married filing separately).

Green Energy Credits
Many residential and vehicle clean energy credits expanded under the Inflation Reduction Act are reduced or eliminated after 2025, including the Clean Vehicle (EV) Credit for purchases after September 30, 2025.

• The Clean Vehicle Credit (EV tax credit) was terminated for purchases after September 30, 2025. Existing credits claimed before the sunset remain valid.
• Credits for residential energy efficiency upgrades, such as heat pumps, windows, and insulation, are reduced or eliminated after 2025.
• The bill blocks future extensions of green credits without separate legislation, so Congress would have to pass a new law to revive these incentives later.

Enhanced Child Tax Credit
The Child Tax Credit increases to $2,200 per qualifying child for 2025 and with inflation adjustments beginning in 2026. The refundable portion is $1,700. Income limits of than $200,000 for a single return & $400,000 if filing a joint return apply, and Under new OBBBA SSN requirements, at least one parent/taxpayer must have a work-eligible SSN (not an ITIN), and the child must also have a SSN.

IRS Gift Tax Exclusion
The annual IRS gift tax exclusion is $19,000 per recipient for both 2025 and 2026. Gifts above this amount must be reported on a federal gift tax return.

Federal Lifetime Gift and Estate Tax
For 2025, the federal lifetime gift, estate, and GST tax exemption amount is $13.99 million per individual. While the 2025 lifetime estate and gift tax exemption remains $13.99 million per person, the One Big Beautiful Bill Act provides relief starting January 1, 2026. The exemption will permanently increase to $15 million per person (indexed for inflation), eliminating the previously scheduled reduction to approximately $7 million. This change provides much greater certainty for long-term estate planning strategies.

Educator Credit
You can deduct up to $300 of unreimbursed classroom expenses if you are an eligible educator. If both spouses are educators and file jointly, they can deduct up to $600 (with each capped at $300).

Estimated Tax Payments
The IRS underpayment and late-payment interest rate for individual taxpayers will be 7% in 2025. Please consider making estimated payments by April 15, even if you request an extension to file your tax return.
Rules to avoid an estimated tax penalty have not changed:

• Pay 100% of prior year tax (or 110% if AGI is over $150,000)
• For the four quarters of 2025, the estimated tax penalty rate is 7%
• If you qualify for new OBBBA deductions, we recommend reviewing whether a 4th quarter federal estimate is still needed

Social Security Updates
Social Security benefits will increase by 2.8% beginning in 2026. Social Security wage base will increase to $184,500 in 2026. For individuals under full retirement age (67), the earned income limit increases to $24,480 in 2026.

IRS Business Mileage Rate
The IRS standard mileage rates are 70 cents per mile for business purposes in 2025.
Standard mileage rates | Internal Revenue Service

Retirement, HSA, and RMD Planning
Maximum Retirement Contributions for 2025
Contribute the maximum allowable amount to retirement accounts such as 401(k)s, IRAs, or SEP IRAs. These contributions can reduce your taxable income and enhance your retirement savings.

• Traditional IRA or Roth IRA: $7,000 ($8,000 if age 50 or older). This limit is unchanged from 2024.
• SIMPLE IRA: $16,500 ($20,000 if age 50 or older).
• 401(k) elective deferrals: $23,500 for individuals under age 50.
• Catch-up contribution for those 50 or older: $7,500 (total $31,000).
• Some age bands (ages 60–63) may have a higher catch-up limit of $11,250 for 401(k) and $5,250 for SIMPLE under SECURE 2.0 provisions.
• SEP IRA: Contributions are limited to the lesser of 25% of compensation or $70,000.

Required Minimum Distributions (RMDs)
Required Minimum Distributions (RMDs) are mandatory, taxable withdrawals from IRAs and retirement plans that generally begin at age 73. The first RMD is due by April 1 of the year after you turn 73, with all future RMDs required by December 31 each year, potentially resulting in two taxable distributions in the first RMD year. For example, if you turned 73 in 2025, your first RMD is due by April 1, 2026, and your second RMD (for 2026) is due by December 31, 2026.

Maximum Health Savings Account (HSA) Contribution Limits for 2025

• Self-only coverage: $4,300.
• Family coverage: $8,550
• Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

2026 Tax Year – Charitable Giving
Beginning in 2026, OBBBA permits non-itemizers to claim an above-the-line deduction for cash contributions to public charities, up to $1,000 for single filers and $2,000 for married filing jointly, without using Schedule A.
Also, if you plan to make charitable contributions, consider donating appreciated assets (such as stocks or real estate) to potentially enhance your tax benefits while avoiding capital gains on the donated property. Be sure to keep thorough documentation for all contributions.

Washington State Tax Updates

Washington Long-Term Capital Gains Tax
Beginning in tax year 2025, Washington’s long-term capital gains tax applies at:

• 7% on the first $1 million of taxable Washington capital gains
• 9.9% (7% + 2.9%) on gains exceeding $1 million

Washington Capital Gains Standard Deduction
The Washington capital gains standard deduction for 2025 is $278,000, up from $270,000 in 2024. This amount is adjusted annually for inflation.

Please contact us in February if you would like to schedule a consultation regarding Washington capital gains planning. For additional details, visit the Washington Department of Revenue website.

These guidelines are intended to support year-end tax planning. Because every financial situation is unique, we recommend scheduling a meeting so we can review your specific circumstances and identify the most effective strategies.

Thank you for trusting us with your financial needs. We look forward to supporting your financial goals in the coming year. Please do not hesitate to reach out with any questions.

Sincerely,
Alisa Na CPAs & Advisors

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The Washington State Legislature has passed Engrossed Substitute Senate Bill (ESSB) 5814, which introduces significant changes to the state’s sales tax laws. These changes, which will take effect on October 1, 2025, are aimed at modernizing the tax code. It is important for all business owners to understand how these new rules may impact their operations.

This article provides a summary of the key changes based on interim guidance from the Washington Department of Revenue.

Digital Automated Services (DAS) and the Definition of a “Retail Sale”

ESSB 5814 broadens the scope of services subject to retail sales tax and the retailing Business and Occupation (B&O) tax. Here are the key takeaways:

• Data Processing is Now a Retail Service: Services such as data processing will now be considered a retail service and will be subject to retail sales tax.
• Expanded Taxation of Digital Services: Previously, certain digital services were exempt from sales tax. This law removes those exemptions. Now, services such as digital advertising, data processing, live-streamed presentations, and services that involve significant human effort are all considered taxable retail sales.
• New Exclusion for Telehealth: A new DAS exclusion has been created for telehealth and telemedicine services.
• Affiliate Sales Exclusion: Certain sales between members of an affiliated group are now excluded from the definition of a retail sale.
• Clarification on Professional Services: The legislature has clarified that professional services will not become taxable simply because they are delivered electronically. The Department of Revenue has provided a framework to distinguish between professional services subject to the service and other B&O tax and taxable DAS.
• Sourcing DAS Sales: The new law outlines a clear hierarchy for determining the location of a DAS sale for tax purposes.

Learn more: https://dor.wa.gov/laws-rules/interim_guidance_statements/interim-guidance-statement-regarding-changes-made-essb-5814-das-exclusions-and-definition-retail

New Tax Treatment for Custom Software

The new law also changes how custom software is taxed. Here’s what you need to know:

• Custom Software as a Retail Sale: The sale of “custom software” and the “customization of prewritten software” will now be considered a retail sale. This means these sales will be subject to both retailing B&O tax and retail sales tax.
• Previous Tax Classification: Previously, these sales were taxed under the service and other activities B&O tax classification.
• Key Definitions:
  • Custom Software: Software created for a single person.
  • Customization of Prewritten Computer Software: An alteration or modification of prewritten software for a specific person.
• Sourcing Custom Software Sales: The sale of custom software is generally taxed based on the location where the purchaser receives the service.
• Multiple Points of Use (MPU) Exemption: Businesses that license custom or customized software for use in multiple states may be eligible for the MPU exemption. This allows the purchaser to apportion and pay use tax directly to the Department of Revenue instead of paying retail sales tax at the time of purchase. However, the MPU exemption is not available for bundled transactions.

Learn More: https://dor.wa.gov/laws-rules/interim_guidance_statements/interim-guidance-statement-regarding-changes-made-essb-5814-custom-software

What This Means for Your Business

The changes introduced by ESSB 5814 are complex and could have a significant impact on your business’s tax obligations. It is crucial to review your sales of services and software to determine how these new rules will affect you.

Please note that the information above is based on interim guidance from the Department of Revenue. The Department will be issuing final guidance in the future.

We encourage you to contact us to discuss your specific situation and ensure you are prepared for these changes when they take effect on October 1, 2025.

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The U.S. Department of the Treasury has announced that, starting September 30, 2025, the federal government will stop issuing paper checks for most federal payments—including IRS tax refunds. The change is part of a broader initiative to improve security, reduce fraud and theft, and speed up payment delivery by transitioning to electronic methods.

At the same time, federal agencies—including the IRS—are moving incoming payments (what taxpayers send to the government) to electronic processing “as soon as practicable.” Treasury’s implementation guidance instructs agencies to phase out lockbox processing and adopt digital collection solutions. While that signals paper checks for tax payments are being phased down, a single, IRS‑specific cutoff date for mailed check payments has not been posted as of today.

Key takeaways

• Refunds: The IRS will no longer mail paper refund checks in the ordinary course for payments issued on or after Sept 30, 2025 (limited exceptions apply “to the extent permitted by law”). Plan now for direct deposit or another approved electronic refund option.
• Paying the IRS: Agencies are directed to process all receipts electronically as soon as practicable and eliminate lockboxes, which means paper checks for tax payments are being phased out. Move to electronic payment methods now to avoid disruption.
• What to use: Recommended options include IRS Direct Pay, EFTPS, and debit/credit card or digital wallet via IRS‑approved processors (fees may apply; cards aren’t for payroll tax deposits).

What’s changing for IRS refunds

Beginning September 30, 2025, federal disbursements will be electronic by default. For the IRS, that means no routine paper refund checks after that date. Exceptions will be limited and grounded in law and Treasury guidance. Electronic delivery is faster and significantly reduces the risk of mail theft and check fraud.

Direct deposit is the fastest way to receive your refund. Don’t have a traditional bank account? Some mobile apps and reloadable prepaid debit cards support direct deposit when they provide routing and account numbers—check with your provider to confirm.

What’s changing for payments to the IRS

The March 25 Executive Order directs the government to move all federal payments and collections to electronic methods, and Treasury’s implementation guidance tells agencies to eliminate lockboxes and process all receipts electronically “as soon as practicable.” For taxpayers, this means a continuing shift away from mailing checks to pay balances due or estimated taxes. Transition now, even though the IRS has not published a single hard cutoff date for accepting mailed checks as of this writing.

Your electronic options (and when to use them)

1) IRS Direct Pay (ACH from your bank account)

Best for individuals paying 1040‑series balances, extensions, or estimates. No fees; schedule each payment as needed.

Learn more: https://www.irs.gov/payments/direct-pay

2) EFTPS — Electronic Federal Tax Payment System

Ideal for businesses (and individuals who want scheduling, history, and recurring payments).

Plan ahead: after you enroll online, your PIN typically arrives by U.S. mail in about 5–7 business days before you can activate and pay.

Enroll: https://www.eftps.gov/eftps

3) Debit/credit card or digital wallet (IRS‑approved processors)

Convenient for one‑off payments; processing fees apply.

Note: You cannot pay federal payroll tax deposits by card—use EFTPS for those.

Options: https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

If you receive federal benefits by paper check

This policy change covers most federal disbursements. If you still get a paper check for Social Security, VA, or other benefits, switch to direct deposit or, if eligible, a Treasury‑sponsored Direct Express® card using the options Treasury lists.

Enroll at GoDirect: https://www.godirect.gov/

Or call Treasury’s Electronic Payment Solution Center: 800‑967‑6857 (Mon–Fri, 9:00 a.m.–7:00 p.m. ET).

Always verify requests to change your payment method to avoid scams.

FAQ

Will the IRS still accept mailed paper checks after September 30, 2025?

Treasury’s guidance requires agencies to process all receipts electronically “as soon as practicable” and to phase out lockboxes, but it doesn’t set a single nationwide cutoff date for mailed checks to the IRS. The direction is clear: move to electronic payments now to avoid disruption.

What are my options if I don’t use a traditional bank account?

Some mobile apps and reloadable prepaid debit cards accept direct deposit if they provide routing and account numbers. Confirm with your provider before filing.

How long does EFTPS enrollment take?

After you enroll online, your PIN typically arrives by U.S. mail within about 5–7 business days. You’ll then activate and set your online password before making payments.

Why is the government ending most paper checks?

To fight fraud and theft, reduce costs, and speed up payments. The Executive Order mandates modernizing payments to and from the federal government, and Treasury is implementing it across agencies.

Are there any exceptions to electronic refunds or payments?

Yes, the policy allows limited exceptions “to the extent permitted by law.” Treasury will publish exception processes where needed.

We can help you switch—today

Our team will help you choose the right electronic method for refunds and payments, enroll you in EFTPS if needed, and set up direct deposit accurately.

Contact us to get started now and avoid last‑minute scrambling.

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For Washington’s investors and business owners, 2025 marks a pivotal shift in the financial landscape. A new era of taxation has begun, with the state implementing a capital gains tax rate that can reach as high as 9.9% on profits from the sale of long-term assets like stocks, bonds, and business interests. This change demands more than a simple adjustment to your tax filings; it calls for a fundamental reassessment of your asset management strategy.

Legally, this tax is classified as an excise tax on the act of selling or exchanging assets, a distinction upheld by the Washington Supreme Court, rather than an income tax. The revenue generated is earmarked to fund critical state priorities, including education, early learning, and childcare programs.

The New Reality: Washington’s Two-Tier Capital Gains Tax Structure

Effective January 1, 2025, Washington’s capital gains tax moves from a single rate to a two-tiered system :

• Tier 1 (7% Base Rate): Applies to the first $1 million of taxable capital gains (the amount of your gain after the standard deduction).
• Tier 2 (9.9% Surtax Rate): For taxable capital gains exceeding $1 million, a 2.9% surtax is added, bringing the total marginal rate to 9.9%.

A standard deduction, which is adjusted annually for inflation, is available to all filers. For 2024, this deduction was $270,000. Crucially, the $1 million threshold for the higher surtax is not indexed for inflation, meaning that over time, more taxpayers will likely find their gains falling into the higher bracket.

For example, if you realize a $1,500,000 taxable gain in 2025 (resulting in a $1,230,000 gain after the $270,000 deduction), your total tax liability would be $92,770. This is $6,670 more than under the previous 7% flat-rate system. The tax impact grows exponentially with the size of the gain.  

The Critical Question: What Is Exempt from the Tax?

Fortunately, the tax does not apply to all asset sales. The Washington State law (RCW 82.87) provides several key exemptions:

• Real Estate: All gains from the sale of real estate—including commercial buildings, land, and rental properties—are fully exempt from Washington’s capital gains tax. When selling an interest in an entity that owns real estate, the exemption applies only to the portion of the gain directly attributable to the property’s value, making an accurate appraisal essential.
• Qualified Family-Owned Small Businesses (QFOSB): Gains from the sale of a qualifying small business may be deductible. The primary requirements include:
  • The business must have worldwide gross revenue below a certain threshold ($10,790,000 for 2024) in the 12 months preceding the sale.
  • The taxpayer or their family members must have owned the business for at least five years and “materially participated” in its operation for at least five of the ten years before the sale.
  • Retirement Accounts: Capital gains realized within federally qualified retirement accounts, such as 401(k)s, IRAs, and Roth IRAs, are not subject to the tax.

  Advanced Tax-Saving Strategies: Beyond Simple Timing

  Effective tax planning requires a sophisticated approach based on a clear understanding of state law. Some widely known federal strategies may not apply in Washington, creating potential pitfalls for the uninformed.
   

  Strategies Requiring Caution

  • Qualified Opportunity Funds (QOFs): While the federal government offers significant tax deferrals for investing capital gains in QOFs, Washington State does not recognize this benefit. Even if you reinvest your gains into a QOF, you must still pay the Washington capital gains tax in the year the gain was realized.
  • Federal SALT Deduction: Attempting to deduct your Washington capital gains tax payment on your federal return is unlikely to succeed. The tax’s classification as an “excise tax” likely makes it ineligible for the State and Local Tax (SALT) deduction, which is primarily for income, sales, and property taxes. Furthermore, the federal SALT deduction is capped (at $10,000, though temporarily raised to $40,000 for 2025 with phase-outs for high earners), limiting its utility for those with significant tax liabilities.

  Effective Strategies for Washington

  • Qualified Small Business Stock (QSBS): This remains one of the most powerful tax-saving tools. Washington’s tax calculation begins with your federal net long-term capital gain. Under federal law (IRC §1202), gains from the sale of QSBS held for over five years can be excluded from federal tax. Because it is excluded at the federal level, the gain is also automatically exempt from Washington’s capital gains tax. This provides a strong incentive for founders and early-stage investors to structure their businesses as C-Corporations.
  • Installment Sales: Structuring the sale of an asset to receive payments over several years allows you to spread the recognition of the gain. This can help keep your annual gain below the $1 million surtax threshold, or even below the standard deduction, thereby reducing or eliminating your tax liability.
  • Change of Domicile: For intangible assets like stocks and bonds, the tax is based on the seller’s domicile at the time of the sale. Legally establishing residency in a state with no capital gains tax (such as Nevada or Texas) before a major liquidity event is a valid strategy. However, this requires a genuine relocation, substantiated by clear evidence like a new driver’s license, voter registration, and primary home, as the state will scrutinize such moves closely.

  Proactive Design, Not Post-Sale Reaction

  Washington’s new capital gains tax structure presents a complex but navigable challenge. The key to preserving your wealth lies not in last-minute maneuvers but in proactive, informed planning. The law itself, particularly the robust exemptions for real estate and qualified small businesses, offers the most reliable paths to tax efficiency. Before signing any major asset sale agreement, it is imperative to consult with a tax professional. A well-designed strategy, tailored to your specific circumstances and grounded in a thorough understanding of Washington’s tax code, can save you tens or even hundreds of thousands of dollars. In the 9.9% era, successful asset management begins long before the sale is final.

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